CRC has suffered ‘kiss of death’

George Osborne has delivered a “kiss of death” to the CRC scheme, according to one of the UK’s major energy consultants. In last month’s Spending Review, the chancellor changed the […]

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By Kelvin Ross

George Osborne has delivered a “kiss of death” to the CRC scheme, according to one of the UK’s major energy consultants.

In last month’s Spending Review, the chancellor changed the rules of the CRC by stating that money generated by the scheme would not be recycled back to those companies in it, but would instead go into the government purse.

Many CRC experts, not to mention those organisations taking part in the scheme, are still adjusting to these changes, and this week M&C Energy Group slammed the chancellor’s actions.

It said what was needed to encourage those businesses still sceptical about the CRC “was a champion to engage with participants and drive home the benefits”.

Instead, said M&C’s Andy Dewis and Scott Cunliffe, Mr Osborne delivered “not the expected rallying cry, more of a kiss of death to the already fledging scheme”.

M&C also takes issue with the change on allowances now being able to be purchased for 2011-12 emissions in 2012 rather than 2011, with the government’s justification being that the CRC will be “simplified to reduce the burden on businesses”.

Arguably, said M&C, the burden on businesses is exactly the same from a day-to-day management perspective and more significant from a financial perspective.

“From what has been released there is a little more breathing space to buy allowances, but this may be followed by a sharper intake of breath, as the new costs for most organisations will be much higher to bear given that revenue will not be recycled and a stealth tax has been introduced,” said the consultants.

They added: “The financial carrot has been removed and the changes to CRC will add approximately 10% onto business energy bills in 2012 – significant, irrespective of size of the organisation.

However, the CRC is here and, until further notice, here to stay, so what should organisations be doing?

“For starters, compliance will still need to be taken seriously,” said Dewis and Cunliffe. “The fines are still there and an automatic bottom place in the league table still stands for non-compliance. An effective reporting structure, audit trail and approval process still need to be established and followed.

“When looking at performance, organisations will need to work smarter to minimise the impact from the CRC changes. This includes developing robust business cases for projects to reduce emissions and for most that will mean more efficient use of energy. Such projects will need to be properly scoped and costed and reviewed on an ongoing basis taking into account numerous internal and macro factors such as the price of energy. The price of energy going forward will seriously impact the yield from a renewable or energy efficiency project for example.”

M&C also stressed that the CRC league table should not be ignored. “Poor placement could result in more than red faces,” the company said. “Effective carbon management is becoming more and more relevant when looking at elements of the business such as supply chain. Four of the largest most recognised retailers in the UK are footprinting their supply chain and, hence, encouraging their suppliers to reduce the footprint in those areas.”

M&C warned: “A business ranked below its competitors on the CRC league table could expose weaknesses, resulting in public and competitive ridicule or, worse still, lost contracts.”

The company added while “the CRC was always a bitter pill for organisations to swallow… it’s best to embrace it to maximise any competitive advantage.”

According to the latest figures from the Environment Agency, administrators of the CRC, 2,779 organisations have so far registered for the scheme.